Members are persons appearing as the named insured on an in-force policy, or as principal in the case of a surety bond, issued by "Member Companies." Our Member Companies include only the following stock insurance companies (1) Liberty Mutual Insurance Company, (2) Liberty Mutual Fire Insurance Company, (3) Employers Insurance of Wausau, and (4) Liberty Mutual Personal Insurance Company. These Member Companies were formerly mutual insurance companies whose policyholders elected to form a mutual holding company. These formations were reviewed and approved by the governing state insurance regulatory authorities.

Policyholders or holders of surety bonds or other insurance obligations issued by LMHC Insurance Companies that are not Member Companies ARE NOT members of Liberty Mutual Holding Company Inc. and are, therefore, not entitled to any such rights of members.

WHAT ARE RIGHTS OF MEMBERS?

Members of Liberty Mutual Holding Company Inc. have uncertificated rights conferred by law, including the rights to: (1) vote for the election of directors at annual meetings of Liberty Mutual Holding Company Inc. as well as other matters requiring a membership vote; (2) share in any distribution of, or receive consideration based upon, the value of Liberty Mutual Holding Company Inc. in liquidation, demutualization, dissolution or otherwise under its articles of organization and bylaws, or otherwise as provided by law; and (3) receive member dividends as, if and when declared and paid by the Board of Directors.

WHEN IS THE MEMBERS ANNUAL MEETING OF LIBERTY MUTUAL HOLDING COMPANY INC.?

It is held on the second Wednesday of April at its headquarters located at 175 Berkeley Street, Boston, Massachusetts.

Massachusetts Compensation Disclosure Law

Named Executive Officer and Director Compensation Disclosures for 2017

The following tables and related footnotes provide information to the members of Liberty Mutual Holding Company Inc. (the "Company") regarding the compensation provided in fiscal year 2017 to the Company's chief executive officer, principal financial officer, its three other most highly compensated executive officers or other former executive officers (collectively "named executive officers"), and its directors, all as required by Section 19X of Chapter 175 of the Massachusetts General Laws (the "Disclosure Statute").

The Disclosure Statute is also applicable to Liberty Mutual Mid-Atlantic Insurance Company and Montgomery Mutual Insurance Company. Both of these entities are mutual insurance companies domiciled in Massachusetts and controlled by the Company (collectively the "Liberty MA Mutual Companies"). The Company notes that none of the executive officers or directors of the Liberty MA Mutual Companies received any compensation from their respective companies in 2017.

The Compensation Committee of the Board of Directors retains an independent consulting firm to advise in determining executive officer compensation. For 2017 the following companies were used to benchmark the Company's executive compensation: Chubb Limited, Progressive Corp., Aetna Inc., Cigna Corp., Prudential Financial Inc., American International Group Inc., The Hartford Financial Service Group, Prudential PLC, The Allstate Corporation, MetLife Inc., and The Travelers Companies.

Compensation Paid to Named Executive Officers 2015- 2017

Name and Principal Position

Year

Salary

Bonus (1)

All Other Compensation (2)

Total

Long, David;

President and Chief Executive Officer

2017

$ 1,236,538

$ 8,315,689

$ 302,559

$ 9,854,787

​

2016

$ 1,186,731

$ 8,905,013

$ 304,528

$ 10,396,272

​

2015

$ 1,136,538

$ 8,114,746

$ 398,444

$ 9,649,729

Langwell, Dennis; EVP and Chief Financial Officer

2017

$ 761,538

$ 1,968,238

$ 62,013

$ 2,791,789

​

2016

$ 718,269

$ 1,989,680

$ 62,691

$ 2,770,640

​

2015

$ 700,000

$ 1,711,016

$ 117,734

$ 2,528,750

Bhalla, Neeti; EVP and Chief Investment Officer

2017

$ 743,269

$ 3,718,854

$ 156,222

$ 4,618,346

​

2016

$ 725,000

$ 3,209,363

$ 134,227

$ 4,068,590

Fontanes, A Alexander; EVP and Chief Investment Officer

2015

$ 843,269

$ 3,370,249

$ 141,800

$ 4,355,318

Sweeney, Timothy; EVP and President, Global Consumer Markets

2017

$ 993,269

$ 3,103,243

$ 92,812

$ 4,189,325

​

2016

$ 927,885

$ 2,654,482

$ 77,304

$ 3,659,670

​

2015

$ 793,269

$ 2,716,583

$ 106,766

$ 3,616,618

Kelley, Kevin; Chief Executive Officer, Ironshore (3)

2017

$800,000

$0

$6,750

$806,750

Target Value of AUs and RUs Awarded

Name and Principal Position

Year

Target Value of

Appreciation Units Awarded (4)

Target Value of

Restricted Units Awarded (5)

Long, David;

President and Chief Executive Officer

2017

$ 7,906,560

$ 1,976,832

​

2016

$ 5,279,930

$ 1,320,096

​

2015

$ 4,839,969

$ 1,209,764

Langwell, Dennis; EVP and Chief Financial Officer

2017

$ 2,030,009

$ 507,387

​

2016

$ 1,119,980

$ 280,147

​

2015

$ 1,120,017

$ 279,962

Bhalla, Neeti; EVP and Chief Investment Officer

2017

$ 2,030,009

$ 507,387

​

2016

$ 1,450,005

$ 362,359

Fontanes, A Alexander; EVP and Chief Investment Officer

2015

$ 1,484,977

$ 371,410

Sweeney, Timothy; EVP and President, Global Consumer Markets

2017

$ 2,924,933

$ 731,428

​

2016

$ 1,759,924

$ 439,858

​

2015

$ 1,395,001

$ 348,931

Kelley, Kevin; Chief Executive Officer, Ironshore (3)

2017

$ 0

$0

Previously Vested AUs Exercised and RUs Redeemed at Discretion of the Named Executive Officers

"All Other Compensation" includes matching contributions under the Company's retirement savings plans (e.g. – 401(k) plan), and the taxable portion, if applicable, of benefits related to personal financial planning and tax preparation services, parking, security, business travel or the personal use of corporate aircraft.

Pension plans provide income for periods of retirement and are structured to reward and retain employees for long service. The Company sponsors a defined benefit pension plan covering substantially all of the Company's employees (the "LM Retirement Plan"). If the benefit for an eligible individual exceeds the tax-qualified limits, the excess is provided from an un-funded, non-qualified plan (the "Non-Qualified Plan"). Given their level of compensation, the named executive officers are all participants in the Non-Qualified Plan. The formula for determining an employee's as well as a named executive officer's annual pension benefit at normal retirement under the Liberty Mutual retirement plans changed effective January 1, 2014 and is now a function of the sum of two distinct formulas.

Any benefit due for service through December 31, 2013 is determined under a final average pay formula. The final average pay formula benefit is equal to the sum of a named individual's 35 year service benefit and an excess service benefit earned for credited service greater than 35 years, where:

- 35 Year Service Benefit — The formula for the first 35 years of credited service results in a benefit at normal retirement for a named individual based on final average pay. The percentage of final average pay used to determine the benefit for credited service through December 31, 2010 is 54% minus 50% of the Social Security benefit, and for credited service beginning on or after January 1, 2011, 35% minus 35% of the Social Security benefit. The benefit of a participant with less than 35 years of credited service will be reduced on a pro rata basis for each year of credited service less than 35; and

- Excess Service Benefit — For the first 5 years of credited service in excess of 35 years, an annual accrual equal to 0.5% of final average pay.

Final average pay under the Liberty Mutual retirement plans is equal to the average of a named individual's eligible compensation for the highest five consecutive calendar years during the last ten calendar years of employment. Pay increases or decreases after December 31, 2013 are taken into account in determining the final average pay benefit. Only base salary and short-term incentive compensation are considered eligible compensation for purposes of the final average pay formula. No additional service credit accrues under the final average pay formula after December 31, 2013.

Effective as of January 1, 2014, a cash balance benefit formula also applies. Under this formula, each participant in the retirement plans will have a notional cash balance account which will be credited with pay credits equal to 4.5 percent per annum of eligible compensation and interest credits based on the 30-Year US Treasury rate for the August immediately preceding a plan year. Compensation taken into account under the final average pay and cash balance formula is the same. The total benefit due under the retirement plans is the sum of the amount due under the final average pay formula and the cash balance formula.

The Company also sponsors a Section 401(k) plan covering substantially all of the Company's employees (the "LM 401(k) Plan") that allows them to set aside eligible pay, subject to a Company match, on a tax advantaged basis. The Non-Qualified Plan also allows participants to elect to set aside eligible pay that is not otherwise allowed for under the Company's 401(k) Plan due to tax law limits for payment at a fixed future date or beginning at retirement. Certain amounts set aside for savings under the Non-Qualified Plan are also matched by the Company under the same match formula that applies to employees generally under the LM 401(k) Plan. Under both the LM 401(k) Plan and the Non-Qualified Plan, amounts set aside by a participant and the matching contributions, are invested in one or more investment options elected by the participants and their account balances are adjusted accordingly for their respective investment gains or losses.

On May 1, 2017, the Company completed its acquisition of Ironshore, Inc. ('Ironshore") and Ironshore became a wholly owned subsidiary of the Company. The payments noted above reflect amounts received in 2017 by Mr. Kelley for serving as the Chief Executive Officer of Ironshore following the acquisition. Previously, Ironshore was owned by affiliates of Fosun International Limited ("Fosun"). Fosun acquired Ironshore on November 20, 2015. As a result of its acquisition of Ironshore, the Company was required to assume Ironshore's obligations under pre-existing compensation arrangements with certain Ironshore executives (the "Pre-Existing Compensation Plans"). These Pre-Existing Compensation Plans contained so-called "change-in-control" provisions. These provisions triggered additional payments to Mr. Kelley in 2017 of $5,688,047 due to the prior Fosun acquisition and $3,801,625 due to the subsequent acquisition by the Company.

The named executive officers were awarded certain amounts of appreciation units ("AUs") under the Liberty Mutual Executive Partnership Plan ("EPP") in 2017. Each AU is a bookkeeping entry that entitles the holder to a payment of cash at a later time. An AU has no immediate cash value. Instead, the named executive officer may only become entitled to a later cash payment to the extent that there is an increase in the unit value after the grant date. The increase or decrease in unit value after the grant date is measured based on the change in the Company's book value. The reported amounts reflect the target AU compensation at the grant date. The target AU compensation is determined based upon reference to market data for executives with similar responsibilities and with companies of similar size and complexity to the Company provided by an independent consultant engaged by the compensation committee of the board. There can be no assurance that the target AU compensation will actually be delivered as the actual amount realized will vary based upon the performance of the Company and the time period the AUs are held prior to exercise. AUs generally vest over a 4 year period in annual increments of 25%. Effective December 31, 2016, the Company terminated the Liberty Mutual Long Term Incentive Plan (LTIP) for senior executives. Beginning in 2017, the pay mix for senior executives was adjusted and target LTIP compensation has been reallocated resulting in increased target AU compensation for impacted participants including the named executive officers. See footnote (6) for additional information concerning AUs.

The named executive officers were awarded certain amounts of restricted units ("RUs") under the Liberty Mutual Executive Partnership Deferred Compensation Plan ("EPDCP") in 2017. Each RU is a bookkeeping entry that entitles the holder to a payment of cash at a later time. The value of each RUs is based on the Company's book value. The reported amounts reflect the target RU compensation at the grant date. The target RU compensation is determined based upon reference to market data for executives with similar responsibilities and with companies of similar size and complexity to the Company provided by an independent consultant engaged by the compensation committee of the board. There can be no assurance that the target RU compensation will actually be delivered as the actual amount realized will vary based upon the performance of the Company and the time period the RUs are held prior to redemption. RUs generally vest over a 4 year period in annual increments of 25%. Effective December 31, 2016, the Company terminated the Liberty Mutual Long Term Incentive Plan (LTIP) for senior executives. Beginning in 2017, the pay mix for senior executives was been adjusted and target LTIP compensation has been reallocated resulting in increased target RU compensation for impacted participants including the named executive officers. See footnote (6) for additional information concerning RUs.

See table entitled "Previously Vested AUs Exercised and RUs Redeemed at Discretion of the Named Executive Officers" for additional compensation paid to the named executive officers. This table sets forth the amount of cash proceeds received by the named executive officers from AUs exercised and RUs redeemed from grants previously awarded and reported. AUs are granted with a 10 year term. AUs can be exercised when vested at the personal discretion and timing of the named executive officer, but within a redemption window, which is in the second quarter of the calendar year. Decisions concerning the timing of redemption of RUs are also at the personal discretion of the named executive officer and must be made prior to the grant and redemption is deferred to either (a) a fixed date beyond the vesting period or (b) upon retirement. See footnotes (4) and (5) for additional information concerning AUs and RUs.

Non-executive directors receive an annual retainer, payable on a quarterly basis. Non-executive directors also received annual retainers, payable on a quarterly basis, if applicable, (a) for serving as a member of separate committees of the board, (b) for serving as a chairman of such committees, or (c) for serving as lead director. Non-executive directors receive additional items, the economic value of which is included in the above disclosure table, including (a) certain business travel benefits, and (b) subject to satisfaction of specific terms and conditions, deferred compensation in the form of RUs limited in time and scope pursuant to the Liberty Mutual Director Partnership Deferred Compensation Plan that are redeemable only subsequent to termination of their board service. Mr. Long as an executive of the Company does not receive any additional compensation for serving as chairman and a director. Only non-executive directors receive compensation for their director services.